Accounts Important

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Accountancy II PUC Chapter wise One mark and Two Marks theory Questions
With Answers, Tips for One mark and Two marks theory questions, Most
important Questions etc.
Note: If any mistakes, or wrong answers founded please inform the above
number.
“The fear of the Lord is the beginning of the Wisdom”-Holy bible.
Chapter 1: Accounting for Not-For-Profit Organisations

(Max marks:3 , 2 Mark:1 and 1 mark:1)
Very Short Answer Questions:

1. Give an example for Not-for-profit organisations.
Ans: Sports club.
2. What is the motive of Not-for-profit Organisations.

Ans: The organisation which function without any profit motive.
Their main aim is to provide service to a specific group or the public
at large.
3.Where do you show Opening B ank ov erdraft in Receipt

and Pay ment Account?
Ans: It shown under Payment side (credit side) of Receipt and
Payment account.
4. Name any one final account of a Not- For- Profit

Organisation.
Ans: Receipt and Payments Account.
5. State any one major source of income of Not- For-

Profit Org anisation.
Ans: Subscription, Life membership fees, Admissions Fees.
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6. State any one books of account maintained by a Not-
For- Profit Organisation.
Ans: Cash book
7. State any one feature of Receipts and Pay ments

Account.
Ans: It is a Real Account.
8. How do you treat the prizes paid, when the prize fund
is not maintained?
Ans: It is treated as revenue expenditure and debited to
Income and expenditure account.
9. What is Capital Fund?

Ans: Capital fund is also known as “general fund”. It is the
difference between the assets and liabilities of Not-for –
profit organisation.
10. Give an example for specific donation.

Ans: Donation for Building.
11. How do you treat the tournament expenses, when

the Tournament Fund is maintained?
Ans: The tournament expenses is deducted from the
tournament under liability side of the balance sheet.
12. How do you treat the Life Membership Fees?

Ans: It is a Capita Receipt, It added to Capital fund.
Section B Two Marks Questions
1. What are Not-For-Profit Organisations?

Not for profit organisations, which do not undertake
trading that is buying and selling of goods but they render
social services to the society or rend services to its
members. OR
They are the organisations which are formed not for
profits but for rendering services to the society
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2. Give any two examples of Not-For-
Profit Organisation
a. Sports clubs c. Public library
b. Public hospitals. d. Public School.
3. State any two features of Not-for

profit organisation
a. They do not undertake business or
trading activities.
b. The funds raised by such
organisations through various sources
are credited to capital fund .
4. Name any two books of accounts maintained by Not-

For-Profit Org anisation
a. Cashbook
b. Journal
c. Ledger
5. Giv e the meaning of Receipts and Pay ments Account

Is a summary of cash receipts and cash payments of not-
for profit organisation ,relating to a given period. Usually
one year, it is prepared to find out the closing cash.
6. State any two features of R eceipt and

Pay ment A ccount.
a. It is a real account
b. It is start with opening cash or bank
balance and ends with closing cash and
bank balance.
7. What do you mean by Income and

Expenditure A ccount?
It is a revenue account of not-for profit
organisation. It is a summary of income and
expenses of non-profit organisations, it
prepared at the end of the accounting year,
it is prepared to find out surplus or deficit of
income over expenditure.
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8. State any two features of Income and
Expenditure A ccount.
a. It is a nominal account.
b. This account similar to profit and loss
account
9. Give any two examples for revenue

expenditure.
a. Salary paid
b. Printing charges
10. Give any two examples for capital expenditure.
a. Purchase of fixed assets
b. Installation charges of a new machinery
11. Give any two examples for revenue receipt.
a. Rent received
b. Interest on investments.
12. Give any two examples for capital receipt.
a. Legacies
b. Life membership fees
13. State two differences between Receipts and
Pay ments A ccount and Income and Expenditure Account.
Receipts and Pay ments a\c Income and Expenditure
a\c
a. It is a real account a. It is a nominal account
b. It is summary of cash b. It is a summary of
receipts and payments incomes and expenses.
c. It take both capital and c. It take only revenue items
revenue items.
14. What is Capital Fund
Capital fund also known as “general fund”. It is the
difference between the assets and liabilities of not-for
profit organisations.
Capital fund is prepared to find out the opening
capital fund is not given in the beginning year by deducting
liabilities from assets in the beginning year.
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15. What are Legacies?
Legacies are gifts or donations received by not-for-profit
organisation under a will on the death of a donor.
- It is treated as capital receipt.
- It added to capital fund.
16. What is Honorarium?
It is the amount paid to the person, who is not regular
employee of the institution.
- It is treated as a “ Revenue expenditure”
- It is debited to income and expenditure account
17. Give the meaning of Endowment Fund.
It is a money or property given by way of bequeath or gift
by a donor to not-for-profit organisation.
- It is treated as Capital receipt.
- It shown under the liabilities side of the Balance sheet
18. How do you treat tournament expenses, when
separate tournament fund is not maintained?
-Tournament expenses is deducted from tournament
fund, under liabilities side of the balance sheet
19. How do you treat prizes awarded, when Prize Fund is
maintained?
- Prizes awarded are deducted from Prize fund, under
liabilities side of the balance sheet.
20. Give the meaning of incidental trading activity.
Some organisations provide trading activities to members
or public in general.
Example: hospital , Canteen, beauty parlour, chemist shop.
In such situation, trading account has to be prepared to
ascertain the results of such incidental activity.
Chapter 2
Accounting for Partnership : Basic concepts
1.Who is a partner?
Persons who have entered into partnership with one
another are individually called partners.
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OR Persons making an agreement to carry business for
common purpose are called Partners.
2. What do you mean by partnership firm?

When two or more persons join hands to set up a business
and share its profits and losses , they said to be
partnership.
OR An association of two or more persons who carry on

business jointly with the intention of sharing profits and
losses is called partnership.
3. State any one features of Partnership.

a. Two or more persons
4. What is the minimum number of partners in a firm?

Ans: 2
5. Name any one contents of Partnership deed?

Ans: Names and addresses of the partners.
6. Name any one Method of maintaining capital accounts

of partners.
Ans: Fixed capital system
7.Name any one final accounts of partnership firm.

Ans: Trading and profit and loss account.
8. How do you distribute profit or loss among the partners

in the absence of partnership deed?
Ans: Equally
9. Why the profit and loss appropriation account is

prepared?
It is prepared show how the profits of a business are
appropriated for various expenses and incomes relating to
partners of a firm.
10. At what rate Interest on advances by partners is to be

paid as per Partnership act?
Ans: 6% per annum.
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11. When interest is charged on partners drawings?
For the period money remained outstanding from the
partners during an accounting year.
12. When Partners current accounts are prepared in

partnership deed?
The capitals of the partners share remain fixed unless
additional capital is introduced.
OR The capital of the partner remains constant(un

changed).
13. State any one special aspect of partnership accounts.

Ans: Dissolution of partnership Firm.
14. When the Current Accounts of Partners are opened?

Under fixed capital system, partners current account are
opened.
15. Under fluctuating capital method , how many accounts

are maintained for each partner?
Ans: Only one account that is partners Capital accounts.
16. State any one feature of fluctuating capital method?

The capital of the partners change from year to year.
17. State any one situation in which provision of pay ment

of interest on capital to partner is made.
a. When partners contribute unequal amounts of capitals
but share profits equally.
18. Find out Interest at 8% p.a. on capital of 50,000 for 9

months.
Ans: 50,000X8%X9/12=Rs.3,000
19. Which is the suitable method for calculation of

interest on drawings, when fixed amount is withdrawn
every month?
Average period method.
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20. Give one example for past adjustment?
It is discovered that interest at the rate of 6% per annum ,
as provided in the partnership deed has not been credited
to the partner’s capital accounts before distribution of
profit.
1.What is Partnership?
When two or more persons join hands to set up a business
and share its profits and losses , they said to be
partnership.
2.Define Partnership?
Section 4 of the Indian Partnership act, 1932 defines
partnership as “ the relation between persons who have
agreed to share the profits of a business carried on by all or
any of them acting for all”.
3. State any two features of partnership.

a. Two or more partners: The minimum members of a
partners can be two
b. Sharing profits: The agreement between the partners
must be to share profits of the business.
4. What is Partnership deed?

When the partnership agreement is written and signed by
all the partners and is duly stamped according to the Stamp
act, it is called “Partnership deed”.
5. What are the methods of maintaining capital account of

partners?
a. Fixed capital system
b. Fluctuating capital system.
6. What is fixed capital method?

-The capital of the partners shall remain fixed unless
additional capital is introduced, and all items like share of
profit or loss, interest on capital , drawings, interest on
drawings , etc are recorded in a separate accounts, called
partners Current account.
OR It is system in which capital of the partner’s remains

fixed, as no adjustments are recorded in the capital
account.(Answer: Scheme of valuation 2015)
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7. What is fluctuating capital method?
-The capitals of the partners fluctuate or change from year
to year. All the items like share of profit and loss, interest
on capital, drawings, interest on drawings, salary or
commission to partners etc. Are recorded directly in the
capital accounts of the partners.
8. State any two differences between fixed and fluctuating

capital accounts
Fixed capital system Fluctuating capital system
1.Two accounts are 1. Only one account that is
maintained like, partners capital account is maintained
capital and current account for each partner
2. The capitals of the 2. The capital of the partners
partners shall remain fixed fluctuate or change from
unless additional capital is year to year.
introduced.
9. What do you mean by Profit and loss Appropriation

account?
-Is merely an extension of the profit and loss account of the
firm. It shows how the profits are appropriated or
distributed among the partners.
10. What is guarantee of profit to a partner?

-The minimum guaranteed amount shall be paid to such
new partner when his share of profit as per the profit
sharing ratio is less than the guaranteed amount.
11. What do you mean by past adjustments?

-Sometimes a few omissions or errors in recording of
transactions or the preparation of summary statements are
found after the final accounts have been prepared and the
profits distributed among the partners.
12. State any two final accounts of a Partnership firm.

a. Trading and profit and loss account.
b. Balance sheet
13. In the absence of partnership deed, specify the rules

relating to the followings:
a. Sharing of profit and losses-
b. Interest on partners capital
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Ans: a. Equally b. Not to be allowed.
14. State the rules relating to the followings in the

absence of Partnership deed:
a. Interest on drawings
b. Interest on advances from partners
Ans: a. Not to be charged.
b. allowed at 6% per annum.
15. Name any methods for calculation of interest on

drawings
a. Average period method.
b. Product method.
16. When the interest on drawings is generally provided

to partners?
-The partnership deed so provides interest on drawings ,
the interest is charged at an agreed rate, for the period
money remained outstanding from the partners during the
accounting period.
17. How do you close profit and loss appropriation

account in partnership?
If it is a profit, debited to partners capital accounts. And it is
a loss it is credited to partners capital accounts.
18. State any two special aspects of partnership accounts.

a. Maintenance of Partners capital accounts
b. Dissolution of partnership
19. Name any two contents of Partnership deed.

a. Name and addresses of the partners
b. Profit and loss sharing ratio
Chapter 3
Reconstitution of a partnership firm Admission of a
partner
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1. What is partnership?
Partnership is an agreement between two or more persons
for sharing the profits of a business carried on by all or any
of them acting for all.
2. What do you mean by reconstitution of a partnership

firm?
Any changes in existing agreement amounts to
reconstitution of the partnership firm.
3. State any one reason for admission of a new partner?

a. When the firm needs additional capital.
4. State any one right acquired by a newly admitted

partner?
Right to share the profits of the partnership firm.
5. Why the NPSR is required at the time of admission of a

partner?
To share the future profits and losses of the firm
6. What is Goodwill?
Goodwill is the value of good name or reputation of
business. It is an intangible asset.
7. State any one factor affecting the value of goodwill

Nature of the business.
8. What is normal profit?

Normal profit refers to a situation where total costs equal
total revenues.
9. State any one method of valuation of goodwill?

Super profit method.
10. Give the formula for sacrifice ratio

Sacrifice ratio=old ratio-new ratio
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11. Which amount* account is to be debited to record the
increase in the value of an asset?
Asset a/c Dr.
To revaluation A/c
12. What is revaluation account?

-Revaluation account is an account prepared in connection
with recording of increase or decrease in the value of asset
and liabilities and to find out the profit or loss on
revaluation.
13. What account will be credited when there is a loss on

revaluation?
It is credited to Old partners capital accounts.
OR
Old Partners capital a/c’s Dr.
To revaluation A/c
14. What account will debited when the cash is brought

by a new partner for his share of goodwill?
-It is debited to Cash or Bank account.
OR
Cash or Bank A/c Dr.

To Goodwill A/c
-
15. What is hidden goodwill?
The value of goodwill is not given at the time of admission
of a new partner.
1. When the goodwill is distributed among old partners in

the sacrificing ratio?
They are:
a. Goodwill brought by the new partner in cash and
withdrawn
b. Goodwill brought by the new partner in cash and
retained
c. Goodwill raised and retained
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2. State any two methods of valuation of goodwill.
a. Average profit method
b. Super profit method
3. State any two rights acquired by a new partner.

a. Right to share in the assets of the partnership firm.
b. Right to share in the profits of the partnership firm.
4. What do you mean by hidden goodwill?

-Sometimes the value of goodwill is not given at the time of
admission of a new partner. In such a situation or case it
has to be transferred from the arrangement of the capital
and profit sharing ratio.
5. Pass the journal entry to write off goodwill raised to the

extent of full value.
a. For distribution of goodwill to old partners:
Goodwill A/c Dr.
To Old partners capital a/c’s
b. Writing of Goodwill
All partners capital A/c’s Dr.
To Goodwill A/c
(Being goodwill written off by all partners in new ratio)
6. State any two matters need adjustments in the books

of the firm at the admission of a new partner.
a. Revalue the assets and liabilities of the firm.
b. to distribute the accumulated reserves and profit and
loss.
7. What is sacrifice ratio?

-The ratio in which the old partners agree to sacrifice their
share of profit in favour of the incoming partner is called
sacrifice ratio.
Sacrifice ratio= old ratio-new ratio
OR
Sacrifice ratio is the ratio in which the old partners sacrifice
or surrender a part of their share of profits to the new
partner on account of admission.
Sacrifice ratio= old ratio-new ratio
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8. Why the sacrifice ratio is calculated?
Sacrifice ratio is calculated in order to distribute the
goodwill brought in cash by the new partner on account of
admission
9. What is the need for the revaluation of assets and

liabilities on the admission of a partner?
a. To record the increase or decrease in the value of asset
revaluation.
b. and also record the unrecorded assets and liabilities, and
also record under or over valued assets, outstanding and
prepaid expenses etc.
10. State any two reasons for admitting a new partner.

a. When the firm needs additional capital
b. When the firm needs managerial help.
11. How do you close revaluation account when there is a

profit?
Revaluation account is debited to old partners capital
accounts in old ratio. OR
Revaluation a/c Dr.

To old partners capital accounts
(Being profit transferred )
12. State any two factors which determine the goodwill of

the firm.
a. Nature of the business
b. Location of the business
13. What is average profit method of valuation of

goodwill?
Under this method, goodwill is valued at agreed number of
years purchase of the average profits of the past few years.
Goodwill= average profits x No. Of years purchased
14. Goodwill of the firm valued at two years purchase of

the average profit of last four years. The total profits for
last four years is Rs. 40,000.Calcualte the goodwill of the
firm.
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Solution: Goodwill=Average profit X No. Of Purchase years
Average profit = 40,000÷ 4 = 10,000
Goodwill=10,000 X 2=Rs. 20,000
15. Pass the journal entry for increase in the value of

building on the admission of a partner.
Building a/c Dr.
To revaluation a/c
(Being increase in the value of building)
16. Pass the journal entry for the decrease in the value of
liability.
Liability a/c Dr.
To revaluation a/c
(Being decrease in the value of liability)
Chapter 4
Retirement and Death of a Partner
(Max marks:1,1 mark:1)
*as per blue print no two marks question from this chapter
* but two marks theory questions given in the question
bank
1. What do you mean by retirement of a partner?
His relation with firm as a partner comes to an end.
OR a partner discontinue from the partnership firm.
2. Give the formula for calculating Gain ratio.

Gain ratio=New ratio-Old ratio
3. Why Gain ratio is required on retirement of a partner?

It is required to writing off the goodwill created to the
extent of retiring partner’s share against the capital
accounts of the remaining partners.
OR Write off the goodwill
4. Why the new ratio is required on retirement of a

partner.
a. To share the future profits of the firm
b. To write off the goodwill
c. To readjust the remaining partners capital.
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5. Give the formula for calculation of new profit sharing
ration on retirement of a partner.
New ratio=Old ratio + Share gained
6. What do you mean by hidden goodwill?

If the firm has agreed to settle the retiring or deceased
partner’s account by paying him a lump sum amount called
hidden goodwill in case retirement of a partner
**this question also in admission with different answer**
7.Porton gained = New share –Old share
1. Mention any two circumstances for retirement of a

partner.
a. Illness
b. Old age of a partner
2. What is gain ratio?

The ratio in which the continuing partners have acquired
the share from the retiring /deceased partner is called the
gain or gaining ratio.
Gain ratio= New ratio-Old ratio
OR The gain ratio or benefit ratio of the remaining partners

is the ratio in which the remaining partners gain or acquire
the share of retiring partner on his retirement .
OR The ratio in which the retiring partner’s share of profit

taken over or benefited by the continuing partners.
3. State any two differences between sacrificing ratio and

gaining ratio.
Sacrifice ratio Gain ratio
a. Calculated at the time of a. Calculated at the time of
admission of a partner retirement of a partner.
b. the old partners agree to b. the continuing partners
sacrifice their share of profit have acquired the share
in favour of the incoming from the retiring partner is
partner is called sacrifice called the gain or gaining
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ratio. ratio.
4. State any two purposes of calculating new profit

sharing ratio.
5. Name two methods of treatment of goodwill?

a. When Goodwill does not Appear in the books
b. When Goodwill is already appearing in the books
6. How do you close the revaluation account on

retirement of a partner?
-If there is a profit, revaluation account is debited to all
partners capital accounts.
-If there is a loss , revaluation account is credited to all
partners capital accounts
OR
a. Profit on revaluation:
Revaluation a/c Dr.
To all partners capital a/c’s
(Being profit transferred)
b. Loss o revaluation:
All partners capital a/cs Dr.
To revaluation a/c
(Being loss transferred)
7. Pass the journal entry for adjusting retiring partners

share of goodwill when no goodwill is raised.
Continuing partner’s capital A/c’s Dr.
To Retiring partners capital A/c
8. Mention any two modes of pay ment on settlement of

retiring partner’s capital account
a. Immediate payment through Cash
b. Transferring entire amount to his loan account
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9. Pass the journal entry to close Retiring partners capital
account when the pay ment is made immediately.
Retiring partner’s capital A/c Dr.
To Cash or Bank A/c.
10. Give the journal entry to close (Revaluation*) Retiring

partner account When it is transferred to Loan A/c
Retiring partner’s capital A/c Dr.
To Retiring partner’s loan A/c
11. Give the journal entry to close Revaluation account

when there is a profit.
Revaluation A/c Dr.
To All partner’s capital A/cs.
12. Give the journal entry to close Revaluation account

when there is a Loss
All partner’s capital A/cs. Dr.
To Revaluation A/c
13. Why do firms revalue the assets and liabilities on

retirement?
-At the time of retirement of a partner there may be some
assets and liabilities not have been shown at their current
values.
14. Why retiring partner is entitled to a share of goodwill

of the firm?
-The retiring partner is entitled to his share of goodwill at
the time of retirement because the goodwill has been
earned by the firm with the efforts of all partners including
retiring partner.
15. A,B,C are partners in a firm sharing profits and losses

in the ratio of 3:2:1. If B retires, then what will be the
NPSR of A and C.
Ans; 3:1
16. Pass journal entry for deceased partners share of

profits for the intervening period.
Profit and loss (Suspense) A/c Dr.
To Deceased partners capital A/c
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(Being share of profit for the intervening period)
(B) DEATH OF A PARTNER

1. Who is an Executors?
-Executors are the legal representatives of a deceased
partner in a partnership firm.
OR When a partner dies, the final balance due to
deceased partner will be paid to his legal heirs called
executors.
2. When do you prepare Executors account?

-In case of death of a partner his claim is transferred to his
executors account.
3. Which account is credited for the share accrued profit

of a deceased partner?
Ans: Profit and loss suspense A/c.
4. What is intervening period?

-The period from date of the last balance sheet and the
date of the partner’s death.
5.How do you close executors Account?

Deceased partner’s executors a/c Dr.
To Balance c/d
Section B: Two Marks Questions
1.Give the meaning of accrued profit.

-The profit of the last balance sheet till the date of death of
partner in a partnership firm is considered as accrued profit
OR Profit earned but not received.
2 .State two difference between retirement and death of

a partner.
Retirement of a partner Death of a partner
1.Retirement of a partner 1. Death of a partner may
takes place generally at the takes place at any time
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end of the year. during the year.
2. Generally retiring 2. Normally deceased
partner’s capital account partner’s capital account
balance is not paid to him balance will be paid to the
immediately on his executors immediately on
retirement. the date of death.
3. Write any two ways of settlement of claims to the

deceased partner.
a. Paid immediately through cash
b. Transferring executors loan account.
4. Write the journal entry to close the deceased partner’s

capital account.
Decease partner’s capital a/c Dr.
To Deceased partners Executor’s A/c.
5. Pass journal entry for transfer of accrued profit of the

deceased partner.
Profit and loss suspense A/c Dr.
To Decease partners Capital A/c
(Being decease partner’s share of accrued profit)
6. Write the journal entry for cash paid immediately to the

executors of the deceased partner?
Deceased partner’s executors A/c Dr.
To Cash/Bank A/c
(Being cash paid immediately)
7. How do you close the executors account when the

payment is not made immediately?
-If the payment is not immediately the balance is
transferred to deceased partner’s executors loan account.
8. A,B,C were partners in a firm sharing profits in the ratio

of 5:4:1. The profit of the firm for the year on 31.3.2017
was Rs. 1,00,00. B dies on 30.6.2017. Calculate B’s share of
profit from 1.4.2017 to 30.6.2017
Ans: 1,00,000x3/12x4/10= Rs. 10,000
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9.Deceased partner’s share of profit=Last year’s profit x his share x time
10. Give the journal entry when retiring partner’s whole amount is
treated as loan.
Retiring partners capital a/c Dr.
To retiring partners loan a/c.
11. Pass the journal entry when retiring partner is partly paid in
cash and the remaining amount is treated as loan.
Retiring partners capital a/c Dr.
To Cash/Bank A/c
To retiring partners loan account.
12. P,Q and R are partners in a firm sharing profits in the ratio of
3:2:1. R retires and the balance in his capital account after making
necessary adjustments workout to be Rs. 60,000 . P and Q agreed
to pay him Rs. 75,000 in full settlement of his claim.
Find out hidden goodwill
Ans: (75,000-60,000) =15,000 R’s share of goodwill.
CHAPTER 5: DISSOLUTION OF PARTNERSHIP FIRM.
Section B: Two Marks Questions
1. What is Dissolution of Partnership?

-Some of the partners terminate their connections with the firm and
the remaining partners of the firm continue the business of the firm
under the same firm’s name under an agreement
OR Dissolution of partnership refers to the termination or

discontinuation of partnership relation between one or more
partners.
OR When one more partners go out of the partnership and cut off
the partnership relation with other partners , it known as dissolution
of partnership.
2. Give the meaning of Dissolution of a Partnership Firm.

-All the partners of the firm cut off their connections or relation with
the firm and the business of the firm is closed down.
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OR The complete closure of any form of business run by the partners
of the firm
OR The breaking or discontinuance of relationship between all the

partners which is termed as the dissolution of partnership firm.
OR Complete closing down (shut-down) of the business of

partnership firm.
OR When all the business activities of a partnership are brought to

an end it is the case of dissolution of a firm.
3. State any two circumstances under which a partnership firm is

dissolved.
a. Dissolution by Agreement
b. Compulsory dissolution
c. Dissolution by notice
d. Dissolution by the court
4. State any two differences between of partnership and

Dissolution of Partnership Firm.
Dissolution of Partnership Dissolution of Partnership Firm

a. the business of the firm is not a. the business of the firm is
terminated terminated
b. The books of accounts are not b. The books of accounts are
closed closed.
5. What is Realisation Account?

-Realisation account prepared at the time of dissolution of a firm to
ascertain the profit/loss on the realisation of assets and payment of
liabilities.
6. Why is Realisation Account?

-Realisation account is prepared to realise the assets and
pay off liabilities on dissolution of a partnership firm.
7. What is the accounting treatment for unrecorded Asset Realised

on Dissolution of a Firm?
Cash/Bank A/c Dr
To realisation a/c.
(Being unrecorded assets)
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8. What is the accounting treatment unrecorded Liability paid on
dissolution of a firm?
Realisation A/c Dr.
To Cash/Bank a/c
(Being unrecorded liabilities)
9. How do you treat PBD on Dissolution of a firm?

It is credited to realisation account.
OR PBD a/c Dr.
To Realisation a/c
10. Give the journal entry for an asset taken over by a partner on
dissolution of a firm.
Partner’s capital A/c Dr.
To Realisation A/c
11. Give the journal entry for a liability taken over by a partner on
Dissolution of a firm.
Realisation A/c Dr.
To Partner’s capital a/c
12. Give the journal entry for transferring an asset to Realisation

Account.
Realisation A/c Dr.
To any or each asset A/c
13. Write the journal entry for the transfer of a outside Liability to
realisation account.
Each or any liability A/c Dr.
To Realisation A/c
14. Give the journal entry for the payment of partner’s Loan on
Dissolution of a Firm.
Partner’s Loan A/c Dr.
To Cash/Bank A/c
15. Give the journal entry for sale of an asset on Dissolution of a

firm.
Cash/Bank A/c Dr.
To Realisation A/c
23
16. Give the journal entry for payment of a liability on Dissolution
of a firm.
Realisation A/c Dr.
To Cash/Bank A/c
17. Give the journal entry for the transfer of profit on realisation.
Realisation A/c Dr.
To Partner’s capital accounts.
18. Give the journal entry for the transfer of loss on realisation.
Partners capital A/c Dr.
To Realisation A/c
19. Give the journal entry for realisation expenses paid by the firm.
Realisation A/c Dr.
To Cash/Bank A/c
20. How do you close realisation A/c on dissolution of a firm?

-Realisation Account is closed by transferring the profit or loss to the
partner’s capital accounts in their profit sharing ratio.
21. Give the journal entry for realisation expenses paid by the
partner on behalf of the firm.
Realisation A/c Dr.
To Partner’s capital A/c
Chapter 6: Accounting for Share Capital

Section A: Short Answer Questions for One marks
1. State any one kind of company?
A. One basis of number of members:
i. Private company
2. What is issued capital?

-Is that part of the authorised capital which is issued to the public for
subscription.
24
3. What is buy back of shares?
When the company purchase its own share it is called Buy Back of
Shares.
4. What is minimum paid up capital of a private company?

Paid up capital is equal to the called-up capital minus call in arrears.
5. When the reserve capital is used?

Winding up or liquidation of the company.
6. What is over subscription?

-When the public applied for more share than those offered to them.
7. What is under subscription?

-When the number of shares applied for by the public is less than the
number of shares offered for subscription.
8. What is issue of shares at par?

-The issue of shares at a price equal to the face value of the shares.
Example: 10 Rs share is issued for Rs 10.
9. What is issue of shares at premium?

-The issue of shares at a price higher or more than the face value of
the shares.
Example: 10 Rs share is issued for Rs 12.
10. When the shares are forfeited?

At the time of non payment of allotment and call money.
Section B: Short Answer Questions for Two marks

1. What is company?
Ans: A Company is an association of persons formed to carry on
business with a view to earn profit, having a common stock called
the ‘share capital , which is divided into equal units called ‘shares’
held by the person called ‘shareholder’.
25
2.State any two features of company?

(any Two these answer as per N.C.E.R.T book)
1.Body corporate: A company is formed according to the provisions

of law enforced from time to time.
2. Separate Legal Entity: Which is distinct and separate from its
members
3. Limited Liability: The Liability of the members of the company is
limited to extent of unpaid amount of shares held by them.
OR State book answer: (any two)

1. company is an association of persons formed usually with a view
to earn profit
2. It is compulsory registered under companies Act.
3. It is an artificial person, but it acts through directors of the
company.
3. What is Prospectus?
-An open invitation to the public to take-up the shares of the
company.
4. What do you mean by over Subscription?

-When the public applied for more share than those offered to them.
5.What is calls in arrears?

-This is the amount called up but not at received.
6.State any two methods of issue of shares

a. Issue at par
b. Issue at premium
7. What is issue of shares for consideration other than shares?

-The company enters into an arrangement with the vendors from
whom it has purchased assets. Whereby the latter agrees to accept
the payment in the form of fully paid shares.
OR
When a company purchases any fixed asset or business and makes
the payment to the vendor inform of issue of shares in place of cash
26
it is called issue of shares for consideration other than shares.
8. What is forfeiture of shares?

Cancellation of shares for non payment of allotment and call money.
9. Give the journal entry for transfer of profit on re-issue

of forfeited shares.
Forfeited shares A/c Dr.
To capital reserve A/c
(Being profit transferred to capital reserve)
10. State any two categories of share capital

a. called up capital
b. paid up capital
ISSUE AND REDEMPTION OF DEBENTURES:

1. What is meant by debentures?

-Debenture is a written instrument acknowledging a debt under the
common seal of the company.
2. What is bond?
-Bond is also instrument of acknowledgement of debt.
3. What is coupon rate?

-Debentures are issued with a specific rate of interest , which is
called coupon rate.
4. What do you mean by zero coupon rate debentures?

-These debentures do not carry a specific rate of interest.
5. What is meant by issue of debentures for consideration other

than cash?
-When the debentures are issued for purchased of asset
OR
Sometimes a company purchase assets from vendors and instead of
making payment in cash issues debentures for consideration there
of.
OR
27
Sometimes debentures can be issued to suppliers of patents,
copyrights and for transfer of intellectual property rights on
preferential basis without receiving money in cash.
6. What is mean by issue of debentures collateral security?

-Any security is addition to primary security is called collateral
security.
OR
-Security provided to lender in addition to the principal security.
7. Name one method of redemption of debentures?

a. Payment in instalments
8. What do you mean by redemption of debentures?

-Repayment of the amount of debentures by the company.
9.Expand DRR-Debenture redemption reserve.
10. Expand DRFI- Debenture Redemption Fund Investment
11. Expand AIFIs- All India Financial Institutions
12. State one type or kind of debentures.

A. From the point of security.
i. Secured debentures.
13.Can the company purchase its own debentures?

-Yes the company can purchase its own debentures.
14.Debenture redemption reserve is shown under which head in

Balance sheet?
-Reserves and Surplus
15. Name the head under which discount on issue of debentures

appears in the balance sheet of a company?
-Other non-current assets
Chapter 7: Financial Statements of a company:

1.Name any one type of financial statements.
-Balance sheet
28
2. State one feature of financial statements.
-Certain accounting conventions are followed while preparing
financial statements.
3.Name any one internal use of financial statements.

-It basic sources of information to the shareholders.
-Which provide the basis for taking decisions
4.Write any one objective of financial statements.

-To provide information about the cash flows.
5.State any one type of reserve.

-Capital reserve
6.Give an example for non-current asset.

-Tangible asset: Building.
7.Where do you record the money received against share

warrants?
- It shown under Shareholders fund
8. How do you treat Credit balance of income statement under the

head surplus?
-
9.Write any one feature of current asset.
-Currents assets are used for short-term use of the business.
-Volume of which changes frequently
10.How do you treat preliminary expenses?

-To be completely written off in the year in which such expenses are
incurred. They should be written off first from the securities
premium and the balance if any, from profit and loss.
1.Give the meaning of financial statements?

-Are the basic and formal annual reports through which the
corporate management communicates financial information to its
owners and various other external parties, which include, investors,
tax authorities, government, employees. Etc
29
OR
Is a systematic process of studying the relationship among the
various financial factors contained in the financial statements to
have a better understanding of the working and financial position of
a business.(CBSE answer)
2. Mention two types of financial statements.

a. Balance sheet(position statement)
b. Statement of profit and loss.
3. State any two features of financial statements.

a. Recording facts: Its prepared on the basis of facts in the form of
cost data recorded in accounting books.
b. Accounting conventions: Certain accounting conventions are
followed while preparing financial statements.
4.Write any two objectives of financial statements.

a. To provide information about the earning capacity of the business.
b. to provide information about cash flows
5. State any two benefits of financial statements.

a. Basis for fiscal policies
b. Helps Stock exchanges
6. Give any two limitations of financial statements.

a. do not reflect current situation: Prepared on the basis of historical
cost.
b. Assets may not realise: Accounting is done on the basis of certain
conventions . Some of the assets may not realise the state value.
c. Aggregate information: It show only aggregate information but
not detailed information.
7.State any 2 postulates.

(*Postulates means concepts)
-Going concern postulate or concept.
30
-Money measurement postulate or concept.
8.How will you disclose the following items in the Balance Sheet of
a company?
a. Loose Tools b. Proposed dividends.
Answer: a. Loose tools: it shown under Inventories.
B. Proposed dividends: It shown under other current liabilities.
9. State any two differences between current liabilities and non-

current liabilities.
Current Liabilities Non-Current Liabilities.
1. It is paid with in one year or 2. It is paid More than one year.
less. Example: Trade payable Example: Debentures
2. It is short-term of sources of 2. It is long-term sources of
funds. funds.
10. Mention any two items which are shown under the head’
Reserves and Surplus’.
a. Capital reserve
b. Securities premium reserve.
c. Debenture redemption reserve.
Chapter:8 Analysis of Financial Statements:

1.What do you mean by Financial Statement Analysis?
The process of critical evaluation of the financial information
contained in the financial statements in order to understand and
make decisions regarding the operations of the firm is called ‘
Financial Statement Analysis’.
2. State any one object of Financial Statement Analysis?

-To determine the earning capacity of the firm.
3. State any one technique of Financial Statement Analysis?

-Comparative statements.
31
4. State any one user of Financial Analysis?
-Top management
-Finance manager.
5. What is Vertical Analysis?

-Common size statements is known as Vertical analysis. In which the
data or figures reported in the financial statement are converted into
percentages of a common base amount.
6. What is Horizontal Analysis?

-Comparative statements are known as horizontal analysis. These are
the statements showing the profitability and financial position of a
firm for different periods of time in a comparative form to give an
idea about the position of two or more periods.
7. State any one importance of Financial analysis.

-Financial analysis is very helpful to trade payables or trade creditors
or suppliers of goods.
8. State any one limitation of Financial Analysis.

-Does not consider price level changes.
9. Give the meaning of analysis.

-Simplification of financial data by methodical classification given in
the financial statements .
10. Give the meaning of interpretation.

-Explaining the meaning and significance of the data.
1.What do you mean by Financial Statement Analysis?

The process of critical evaluation of the financial information
contained in the financial statements in order to understand and
make decisions regarding the operations of the firm is called ‘
Financial Statement Analysis’.
32
2. Give the meaning of Analysis and Interpretation of financial
statements.
meaning of analysis.-Simplification of financial data by methodical
classification given in the financial statements .
meaning of interpretation.-Explaining the meaning and significance
of the data.
3. List any two tools or technique of financial statement analysis.

a. Comparative Statements
b. Common size statements
c. Ratio analysis
4. Distinguish between Vertical and Horizontal Analysis of Financial

data.
Vertical Analysis. Horizontal Analysis.
a. Figures in the financial a. Figures in the financial
statement for a single year are statements for two or more years
analysed. are compared and analysed.
b. It involves the study of b. It helps in knowing the trends
relationship between various of the business over a period of
items of Balance sheet or time
statement of profit and loss of a
single year or period.
c. Example: Common size c. Example: Comparative
statements and ration analysis. statements and Cash flow
statement .
5. What are Comparative Financial Statements?

Comparative statements are known as horizontal analysis. These are
the statements showing the profitability and financial position of a
firm for different periods of time in a comparative form to give an
idea about the position of two or more periods.
6.What do you mean by common size statements?

Common size statements is known as Vertical analysis. In which the
data or figures reported in the financial statement are converted into
percentages of a common base amount
33
7. State any two importance of financial statement Analysis.
a. Lenders: Help to the lenders who provide long-term finance to the
business enterprises.
b. Investors: help the prospective investors , who would like to know
the earning capacity and financial position of the enterprises before
investing their funds on the shares of the company.
c. Trade Payables or Creditors: Financial analysis is very helpful to
trade payables or trade creditors or suppliers of goods.
8. State any two objectives of financial statement Analysis.

a. To know the earning capacity of the firm
b. To know the financial position of the firm.
9. State any two users of Financial Statement Analysis.

a. Finance manager
b. Top Management.
10. State any two limitations of Financial Statement Analysis.

a. Does not consider price level changes
b. Is just a study of reports of the company
11. Give the Absolute increase and percentage increase for the
following:
Previous Year Current Year
Revenue from operations 60,000 75,000
Solution:
Absolute increase=75,000-60,000=Rs.15,000
percentage increase=15,000 X100÷60,000=25%
12.Give the formula for percentage change in comparative
Statement.
Absolute increase or Decrease X100
First year absolute figure
34
13.Distinguish between vertical and horizontal analysis of
financial data.
statement .
14. State the importance of Comparative Statements

The figures in the comparative statements can be used for
identifying the direction of changes and also the trends in different
indicators of performance of an organisation.
15. State the importance of common size Statements.

Common size analysis is of immense use for comparing enterprises
which differ substantially in size as it provides an insight into the
structure of financial statements.
Chapter:9 Accounting Ratios:

1.Give the meaning of Ratio Analysis.

Ratio analysis is the technique of analysis and
interpretation of financial statements with the help of
accounting ratios.
2. State any one objective of ratio analysis.

-To know the areas of the business which need more
attention.
35
3. State any one use of ratio analysis.
-Helps in decision making.
4. Mention any one limitation of ratio analysis.

-Ignores or neglects price level changes.
5. Mention any one type of ratio.

a. Traditional classification
-Balance sheet ratios.
6. Give one example for current assets.

a. Stock or inventories.
7. Give one example for current liability.

a. Trade payables.
8. What is current ratio?

Current ratio is the proportion of current assets to current
liabilities. Current ratio=current assets: current liabilities
9. What is quick ratio?

It is the ratio of quick or liquid asset to current liabilities.
Quick ratio= Quick assets: Current liabilities.
10. Name any one type of turnover ratio.

-Stock or inventory turnover ratio.
11. Give the meaning of net profit ratio

Is based on all inclusive concept of profit. It relates revenue
from operations to net profit after operational as well as
non-operational expenses and incomes.
12. Give the meaning of dividend payout ratio.

This refers to the proportion of earning that are distributed
to the shareholders.
36
Dividend payout ratio=Dividend per share
Earning per share
13.What is activity ratio?

These ratios indicate the speed at which, activities of the
business are being performed.
14. State one significance of interest coverage ratio.

-It reveals the number of times interest on long-term debts
is covered by the profits available for interest.
-A higher ratio ensures safety of interest on debts.
15. Expand EPS

-Earning Per Share
Chapter:10 Cash flow statement

1. What is the main objective of cash flow statement?
-Provides information about the cash flows (inflows and
outflows) of an enterprise or firm.
2. Mention any one benefit of cash flow statement?

-It provides information that enables users to evaluate
changes in net assets of an enterprise.
3. Give the meaning of cash flows.

-Cash flows implies movement of cash in and out due to
some non cash items.
4. What are operating activities?

-Are the activities constitute or focuses or aim at primary or
main activities of an enterprise.
5. Give an example for investing activities.

-Purchase of land, machinery, Sale of furniture etc.
37
6. Give an example for cash inflows from financing
activities.
- Issue of equity shares, Issue of debentures etc.
7. Give an example for cash outflows from financing

activities.
-Repayment of Debentures, Payment of interest and
dividend etc.
8. Give an example for extraordinary item.

-Loss due to theft
-Earthquake
-Flood
9. Expand ICAI
-Institute of Chartered Accountant of India.
1.What is cash flow statement?

-A statement which shows inflow and outflow of cash and
cash equivalents from operating , investing and financing
activities during a specific period.
2. State any two uses of cash flow statement.

-Helps in balancing its cash inflow and cash outflow,
keeping in changing condition
-It Provides information that enables users to evaluate changes in
net assets of an enterprise.
3. Write any two objectives of preparing cash flow

statement.
- Provides information about the cash flows(inflows and
outflows) of an enterprise.
-Helpful for short-term planning, for preparing cash budget.
-It indicates historical changes in cash and cash equivalents
38
, by classifying the cash flows from operating, investing,
and financing activities.
4. what do you mean by investing activities?

-Its related to purchase and sale of fixed asset such as
machinery, furniture, land and building etc.
5. Mention any two activities which are classified as per

AS-3.
-Operating activities
-Investing activities
-Financing activities.
6. Write any two examples for financing activities.

-Issue of equity shares, Issue of debentures, Repayment of
debentures, payment of dividend and interest.
7. If revenue from operation are Rs. 48,000, opening trade

receivables are Rs. 8,000 and closing trade receivable are 6,000,
Calculate cash receipts from customers.
Solution: Cash receipt from customers = Revenue from operation +

Trade receivable in the beginning –Trade receivable in the end
Cash receipt from customers= 48,000,+8,000-6,000=Rs. 50,000
8. If purchases are Rs. 72,000, opening trade payables are Rs.

12,000 and closing trade payables are Rs. 9,000. Calculate cash
payments to suppliers.
Solution: Cash payment to supplier= Purchases + Trade payables in

the beginning – Trade payables in the end.
Cash payment to supplier = 72,000 + 12,000 – 9,000 =75,000
*Tips For One mark Theory Questions:

Fill in the Blanks - 02 Questions.
Multiple choice - 02 questions.
True/False - 01 Questions.
Expand - 01 Questions.
Example - 01 Questions.
Very Short answer - 03 Questions.
39
Tips: 1: For fill the Blanks: (2 Questions)
-The First question from Part A, There are 55 Fill in the Blanks
Question in part A Book.
-The second question from Part B , There are 63 Fill in the Blanks
questions in Part B Book.
Tips: 2: Multiple Choice Questions: (2 Questions)
-The First question from Part A Book.

-The second question from Part B Book.
Tips: 3: True or False Question: (1 Question)
As per the reference of 5 Model questions papers and Preparatory

paper 2019, 95% guaranteed the question is ask from Part A Book
only.
Tips: 4: Expand: (1 Question)
Only few questions are in this category, I have provided all Expand
questions as per Question Bank and Also Whole Syllabus.
*Expand questions as per Question Bank.

1.DRR-Debenture redemption reserve.
2.DRFI- Debenture Redemption Fund Investment
3.AIFIs- All India Financial Institutions
4.EPS-Earning Per Share
5.ICAI-Institute of Chartered Accountant of India.
*Expand questions In Whole Syllabus.

1. OPC: One Person Company
2. TDS: Tax Deducted at Source
3. DRR: Debenture Redemption Reserve
4. AIFIS: All India Financial Institutions
5. NHB: National Housing Bank
6. SEBI: Securities and Exchange Board of India
7. MCA: Ministry of Corporate Affairs
8. IAS: Indian Accounting Standards
9. SWOT: Strength, Weakness, Opportunity, Threat analysis
10. ROI: Return on Investment
40
11. ROCE: Return on Capital Employed
12. RONW: Return on Net Worth
13. PBIT: Profit Before Interest and Tax
14. EPS: Earning Per Share
15. PAT: Profit After Tax
16. P/E Ratio: Price /Earning ratio
17.ICAI: Institute of Chartered Accountant of India.
18 . EBIT: Earning Before Interest and Tax
19. DRF: Debenture redemption fund
20. DRFI: Debenture Redemption Fund Investment
* don’t miss One mark From This Category*
Tips: 5:Example: (1 Question)
*There is a definitely ask one example question. Only Few questions

in Question Bank they are given Below.
1.Give an example for Not-for-profit organisations.

Ans: Sports club.
2.Give an example for specific donation.

Ans: Donation for Building.
3.Give one example for past adjustment?

It is discovered that interest at the rate of 6% per annum ,
as provided in the partnership deed has not been credited
to the partner’s capital accounts before distribution of
profit.
4. Give an example for non-current asset.

-Tangible asset: Building.
5.Give one example for current assets.

a. Stock or inventories. b. Trade receivable.
6. Give one example for current liability.

a. Trade payables.
41
7.Give an example for investing activities.
-Purchase of land, machinery, Sale of furniture etc.
8. Give an example for cash inflows from financing

activities.
- Issue of equity shares, Issue of debentures etc.
7. Give an example for cash outflows from financing

activities.
-Repayment of Debentures, Payment of interest and
dividend etc.
9.Give an example for extraordinary item.

-Loss due to theft
-Earthquake
-Flood
Tips: 6: Very Short answers: (3 Question)
As per the reference of 5 Model Question papers and Preparatory

paper 2019, The Two short Answer questions is asked from Part B
Book, in part B there are 69 questions.
-If you want get 2 Marks, study all the question Bank questions in
Part B.
-One short answer question is asked from Part A
Tips For Two Marks Theory Questions:

-Meaning, Definition,
-features, and Objectives.
-Merits and Demerits
-Types, Methods,
-Examples
-Journal entry
-Situations, Steps, circumstances
-Differences
-Small calculations.
42
Tips 1: Meaning, Definition for 2 Marks.
-Study both Part A and B book chapter wise meaning and definition.
Tips 2: Features and Objectives Questions For 2 Marks
A. Chapter wise Features Questions:
1. State any two features of Not-for

profit organisation
a. They do not undertake business or
trading activities.
b. The funds raised by such
organisations through various sources
are credited to capital fund .
2.State any two features of R eceipt and

Pay ment A ccount.
a. It is a real account
b. It is start with opening cash or bank
balance and ends with closing cash and
bank balance.
3. State any two features of Income and

Expenditure A ccount.
a. It is a nominal account.
b. This account similar to profit and loss
4. State any two features of partnership.
a. two or more partners: The minimum members of a
partners can be two
b. Sharing profits: The agreement between the partners
must be to share profits of the business.
5. State any two features of company?

(any Two these answer as per N.C.E.R.T book)
1.Body corporate: A company is formed according to the provisions
of law enforced from time to time.
2. Separate Legal Entity: Which is distinct and separate from its
members
43
3. Limited Liability: The Liability of the members of the company is
limited to extent of unpaid amount of shares held by them.
OR
State book answer: (any two)
1. company is an association of persons formed usually with a view
to earn profit
2. It is compulsory registered under companies Act.
3. It is an artificial person, but it acts through directors of the
company.
6. State any two features of financial statements.

a. Recording facts: Its prepared on the basis of facts in the form of
cost data recorded in accounting books.
b. Accounting conventions: Certain accounting conventions are
followed while preparing financial statements.
B. Chapter wise Objective Questions:
1. Write any two objectives of financial statements.

a. To provide information about the earning capacity of the business.
b. to provide information about cash flows
2. State any two objectives of financial statement Analysis.

a. To know the earning capacity of the firm
b. To know the financial position of the firm.
3. Write any two objectives of preparing cash flow
statement.
- Provides information about the cash flows(inflows and
outflows) of an enterprise.
-Helpful for short-term planning, for preparing cash budget.
-It indicates historical changes in cash and cash equivalents
, by classifying the cash flows from operating, investing,
and financing activities.
44
Tips 3:-Merits and Demerits questions for 2 Marks:
A. Chapter wise all

Merits/Advantages/Benefits/Significance/Importance Questions
are Given Below:
1.State any two benefits of financial statements.

a. Basis for fiscal policies
b. Helps Stock exchanges
2. State any two importance of financial statement Analysis.
a. Lenders: Help to the lenders who provide long-term finance to the

business enterprises.
b. Investors: help the prospective investors , who would like to know
the earning capacity and financial position of the enterprises before
investing their funds on the shares of the company.
c. Trade Payables or Creditors: Financial analysis is very helpful to
trade payables or trade creditors or suppliers of goods.
3. State any two users of Financial Statement Analysis.

a. Finance manager
b. Top Management.
4. State the importance of Comparative Statements

The figures in the comparative statements can be used for
identifying the direction of changes and also the trends in different
indicators of performance of an organisation.
5. State the importance of common size Statements.

Common size analysis is of immense use for comparing enterprises
which differ substantially in size as it provides an insight into the
structure of financial statements.
6.State any two uses of cash flow statement.

-Helps in balancing its cash inflow and cash outflow,
keeping in changing condition
-It Provides information that enables users to evaluate changes in
net assets of an enterprise.
45
B. Chapter wise all Demerits/Disadvantages/Limitations/ Questions
are Given Below:
1. Give any two limitations of financial statements.

a. do not reflect current situation: Prepared on the basis of historical
cost.
b. Assets may not realise: Accounting is done on the basis of certain
conventions . Some of the assets may not realise the state value.
c. Aggregate information: It show only aggregate information but
not detailed information.
2. State any two limitations of Financial Statement Analysis.

a. Does not consider price level changes
b. Is just a study of reports of the company
Tips4;-Types, Methods,Techniques, Categories, Items, for 2 Marks:
1. Name any two books of accounts maintained by Not-

For-Profit Org anisation
a. Cashbook
b. Journal
c. Ledger
2. What are the methods of maintaining capital account of
partners?
a. Fixed capital system
b. Fluctuating capital system.
3. State any two final accounts of a Partnership firm.

a. Trading and profit and loss account.
b. Balance sheet
4. Name any methods for calculation of interest on

drawings
a. Average period method.
b. Product method.
5. State any two special aspects of partnership accounts.

a. Maintenance of Partners capital accounts
46
b. Dissolution of partnership
6. Name any two contents of Partnership deed.

a. Name and addresses of the partners
b. Profit and loss sharing ratio
7. State any two methods of valuation of goodwill.

a. Average profit method
b. Super profit method
8. State any two rights acquired by a new partner.

a. Right to share in the assets of the partnership firm.
b. Right to share in the profits of the partnership firm.
9. State any two factors which determine the goodwill of

the firm.
a. Nature of the business
b. Location of the business
10. State any two methods of issue of shares

a. Issue at par
b. Issue at premium
11. State any two categories of share capital

a. called up capital
b. paid up capital
12. Mention two types of financial statements.

a. Balance sheet(position statement)
b. Statement of profit and loss.
13. State any 2 postulates.

(*Postulates means concepts)
-Going concern postulate or concept.
-Money measurement postulate or concept
.
14. Mention any two items which are shown under the head’
Reserves and Surplus’.
a. Capital reserve
47
b. Securities premium reserve.
c. Debenture redemption reserve.
15. List any two tools or technique of financial statement analysis.

a. Comparative Statements
b. Common size statements
c. Ratio analysis
16. Mention any two activities which are classified as per

AS-3.
-Operating activities
-Investing activities
-Financing activities.
Tips 5:Examples for 2 Marks.

*As per the reference of 5 Model Question papers and Preparatory
paper 2019, There is One Example Question is asked for 2 Marks.*
Study the following Questions.

1.Give any two examples of Not-For-
Profit Organisation
a. Sports clubs c. Public library
b. Public hospitals. d. Public School
2.Giv e any two examples for revenue
expenditure.
a. Salary paid
b. Printing charges
3. Give any two examples for capital

expenditure.
a. Purchase of fixed assets
b. Installation charges of a new machinery
5. Give any two examples for revenue receipt.
a. Rent received
b. Interest on investments.
6. Give any two examples for capital receipt.
a. Legacies
b. Life membership fees
48
7.Write any two examples for financing activities.

-Issue of equity shares, Issue of debentures, Repayment of
debentures, payment of dividend and interest.
Tips 6: Journal entry for 2 Marks.

*As per the reference of 4 Model Question papers and Preparatory
paper 2019, There is One Journal entry question is asked for two
marks*
- 90% is guaranteed the question is asked from Dissolution of
Partnership and 10% is chances for Admission of a Partner
Study the following questions:

a. Journal entry questions On Dissolution of Partnership:
1. Give the journal entry for the transfer of loss on realisation.

Partners capital A/c Dr.
To Realisation A/c
2.What is the accounting treatment for unrecorded Asset Realised

on Dissolution of a Firm?
Cash/Bank A/c Dr
To realisation a/c.
(Being unrecorded assets)
3.What is the accounting treatment unrecorded Liability paid on

dissolution of a firm?
Realisation A/c Dr.
To Cash/Bank a/c
(Being unrecorded liabilities)
4.How do you treat PBD on Dissolution of a firm?

It is credited to realisation account.
OR PBD a/c Dr.
To Realisation a/c
5.Give the journal entry for an asset taken over by a partner on

dissolution of a firm.
Partner’s capital A/c Dr.
To Realisation A/c
49
6.Give the journal entry for a liability taken over by a partner on
Dissolution of a firm.
Realisation A/c Dr.
To Partner’s capital a/c
7. Give the journal entry for transferring an asset to Realisation

Account.
Realisation A/c Dr.
To any or each asset A/c
8.Write the journal entry for the transfer of a outside Liability to

realisation account.
Each or any liability A/c Dr.
To Realisation A/c
9. Give the journal entry for the payment of partner’s Loan on

Dissolution of a Firm.
Partner’s Loan A/c Dr.
To Cash/Bank A/c
10.Give the journal entry for sale of an asset on Dissolution of a

firm.
Cash/Bank A/c Dr.
To Realisation A/c
11. Give the journal entry for payment of a liability on Dissolution

of a firm.
Realisation A/c Dr.
To Cash/Bank A/c
12.Give the journal entry for the transfer of profit on realisation.

Realisation A/c Dr.
To Partner’s capital accounts
13.Give the journal entry for realisation expenses paid by the firm.
Realisation A/c Dr.
To Cash/Bank A/c
14. Give the journal entry for realisation expenses paid by the
partner on behalf of the firm.
Realisation A/c Dr.
50
To Partner’s capital A/c
a. Journal entry questions On Admission of a parnter:
1. Pass the journal entry for the decrease in the value of

liability.
Liability a/c Dr.
To revaluation a/c
(Being decrease in the value of liability)
2. Pass the journal entry for increase in the value of

building on the admission of a partner.
Building a/c Dr.
To revaluation a/c
(Being increase in the value of building)
3. How do you close revaluation account when there is a

profit?
Revaluation account is debited to old partners capital
accounts in old ratio. OR
Revaluation a/c Dr.

To old partners capital accounts
(Being profit transferred )
4. Pass the journal entry to write off goodwill raised to the

extent of full value.
a. For distribution of goodwill to old partners:
Goodwill A/c Dr.
To Old partners capital a/c’s
b. Writing off Goodwill

All partners capital A/c’s Dr.
To Goodwill A/c
(Being goodwill written off by all partners in new ratio)
Tips7:Situations, Steps, circumstances,Reasons,Purposes:
1. When the goodwill is distributed among old partners in

the sacrificing ratio?
They are:
51
a. Goodwill brought by the new partner in cash and
withdrawn
b. Goodwill brought by the new partner in cash and
retained
c. Goodwill raised and retained
2. State any two matters need adjustments in the books

of the firm at the admission of a new partner.
a. Revalue the assets and liabilities of the firm.
b. to distribute the accumulated reserves and profit and
loss.
3. Why the sacrifice ratio is calculated?

Sacrifice ratio is calculated in order to distribute the
goodwill brought in cash by the new partner on account of
admission
4. What is the need for the revaluation of assets and

liabilities on the admission of a partner?
a. To record the increase or decrease in the value of asset
revaluation.
b. and also record the unrecorded assets and liabilities, and
also record under or over valued assets, outstanding and
prepaid expenses etc.
5. Mention any two circumstances for retirement of a

partner.
a. Illness
b. Old age of a partner
6. State any two purposes of calculating new profit

sharing ratio.
7. State any two circumstances under which a partnership firm is

dissolved.
a. Dissolution by Agreement
b. Compulsory dissolution
c. Dissolution by notice
52
d. Dissolution by the court
Tips8:-Differences, Chapter wise Questions for 2 Marks;
1.State two differences between Receipts and Pay ments

Account and Income and Expenditure Account.
Receipts and Pay ments a\c Income and Expenditure
a\c
a. It is a real account a. It is a nominal account
b. It is summary of cash b. It is a summary of
receipts and payments incomes and expenses.
c. It take both capital and c. It take only revenue items
revenue items.
2.State any two differences between fixed and fluctuating

capital accounts
Fixed capital system Fluctuating capital system
1.Two accounts are 1. Only one account that is
maintained like, partners capital account is maintained
capital and current account for each partner
2. The capitals of the 2. The capital of the partners
partners shall remain fixed fluctuate or change from
unless additional capital is year to year.
introduced.
3. State any two differences between sacrificing ratio and

gaining ratio.
Sacrifice ratio Gain ratio
a. Calculated at the time of a. Calculated at the time of
admission of a partner retirement of a partner.
b. the old partners agree to b. the continuing partners
sacrifice their share of profit have acquired the share
in favour of the incoming from the retiring partner is
partner is called sacrifice called the gain or gaining
ratio. ratio.
4 .State two difference between retirement and death of

a partner.
Retirement of a partner Death of a partner
1.Retirement of a partner 1. Death of a partner may
takes place generally at the takes place at any time
53
end of the year. during the year.
2. Generally retiring 2. Normally deceased
partner’s capital account partner’s capital account
balance is not paid to him balance will be paid to the
immediately on his executors immediately on
retirement. the date of death.
5. State any two differences between of partnership and

Dissolution of Partnership Firm.
Dissolution of Partnership Dissolution of Partnership Firm

a. the business of the firm is not a. the business of the firm is
terminated terminated
b. The books of accounts are not b. The books of accounts are
closed closed.
6. Distinguish between Vertical and Horizontal Analysis of Financial

data.
statement .

current liabilities.
Current Liabilities Non-Current Liabilities.
1. It is paid with in one year or 2. It is paid More than one year.
less. Example: Trade payable Example: Debentures
2. It is short-term of sources of 2. It is long-term sources of
funds. funds.
54
Tips;9 Simple Problems for (2 Marks):
1. Goodwill of the firm valued at two years purchase of

the average profit of last four years. The total profits for
last four years is Rs. 40,000.Calcualte the goodwill of the
firm.
Solution: Goodwill=Average profit X No. Of Purchase years

Average profit = 40,000÷ 4 = 10,000
Goodwill=10,000 X 2=Rs. 20,000
2. Give the Absolute increase and percentage increase for the

following:
Previous Year Current Year
Revenue from operations 60,000 75,000
Solution:
Absolute increase=75,000-60,000=Rs.15,000
percentage increase=15,000 X100÷60,000=25%
3. If revenue from operation are Rs. 48,000, opening trade

receivables are Rs. 8,000 and closing trade receivable are 6,000,
Calculate cash receipts from customers.
Solution: Cash receipt from customers = Revenue from operation +

Trade receivable in the beginning –Trade receivable in the end
Cash receipt from customers= 48,000,+8,000-6,000=Rs. 50,000
4. If purchases are Rs. 72,000, opening trade payables are Rs.

12,000 and closing trade payables are Rs. 9,000. Calculate cash
payments to suppliers.
Solution: Cash payment to supplier= Purchases + Trade payables in

the beginning – Trade payables in the end.
Cash payment to supplier = 72,000 + 12,000 – 9,000 =75,000
Tips: 10 Special treatment Questions for 2 Marks.
1. How do you treat tournament expenses, when

separate tournament fund is not maintained?
55
-Tournament expenses is deducted from tournament
fund, under liabilities side of the balance sheet
2.How do you treat prizes awarded, when Prize Fund is
maintained?
- Prizes awarded are deducted from Prize fund, under
liabilities side of the balance sheet.
3. How will you disclose the following items in the Balance Sheet of
a company?
a. Loose Tools b. Proposed dividends.
a. Loose tools: it shown under Inventories.
B. Proposed dividends: It shown under other current liabilities.
Conform Marks From Theory, 6 Marks:

-Expand : 1Mark
-Example : 3 Marks, (1mark and 2 Mark)
-Journal entry : 2 mark
Important 2 Marks Questions:

As per reference of old Question papers 2018-2006
and More than 10 Model question papers:
Chapter 1: Not-for Profit organisation.
1.Give two examples for Non-Profit organisation.(2018 and 2017

2006 Annual exam, Preparatory 2016)
2. What is Legacies?(2016 and 2010 Annual .M.Q.P, Preparatory
2018)
3.What are non-profit organisation?(2015 and 2009 Annual 2018
M.Q.P by P.U Board, Preparatory 2019)
4.What are non-trading concerns? Give example.(2014 and
2011,2007 Annual)
5.What is Revenue expenditure?(2013 Annual)
6.Give two examples for Revenue Receipts.(2012 Annual)
7.Give the meaning of capital expenditure?(2011 March)
8. Which are the final accounts of a Non-trading concern?(2010
June)?
56
9.State any two features of Income and Expenditure Account.(2009
June, Preparatory 2015)
10.Bring out any two differences between Receipts and Payments
account and Income and Expenditure account?(2008 Annual)
11. Point out any two differences between Capital expenditure and
Revenue expenditure(2008 June)
12. Give two examples for Capital expenditure(2007 Annual)
13. State any two features of Receipts and Payments Account.(2006
Annual, 2018 M.Q.P by P.U Board )
14. What is Capital fund?(2018 M.Q.P by P.U Board)
15.State any Features of Non-profit organisation(2018 M.Q.P by P.U
Board)
16. Give two examples for Capital expenditure(2018 M.Q.P by P.U
Board).
17. How do you treat prize awarded, when prize fund is
maintained?(M.Q.P, M.Q.P by P.U Board)
18.Give the meaning of Endowment fund(M.Q.P)
19.What is subscription in case of Not-profit organisation? (M.Q.P)
20.State any two Books of Accounts maintained by Not-profit
organisation? (M.Q.P, Preparatory 2018)
21.What is Capital expenditure?( M.Q.P by P.U Board)
22. What are Legacies ? How do you treat it?( M.Q.P by P.U Board)
Chapter:2 Accounting for Partnership Basic concepts.

1.What is Partnership deed?(2018,2006 Annual)
2. What is Profit and Loss appropriation account?(2017 Annual)
3.Give the meaning of Fluctuating capital system?(2016,
2013,2010,2007 annual)
4.What is fixed capital system?(2015, 2011,2009 Annual,
Preparatory 2016,2015)
5.Mention any two rules to be followed in the absence of
Partnership deed?)2014, 2008 Annual)
57
6. Mention two methods of Capital accounts maintained in
partnership Business.(2012,2007 Annual, M.Q.P, Preparatory 2018)
7.What is Partnership deed?(2011,2010 Annual)
8.State any two contents of Partnership deed(2009,2008 ,Annual,
2018 M.Q.P by P.U Board, Preparatory 2019)
9. In the absence of Partnership deed, how do you treat the
following?(2006 July)
a. Interest on capital
b. Salary to a partner
10. Write any two differences between fixed and Fluctuating capital
system.( 2018 M.Q.P by P.U Board)
11.Define Partnership (2018 M.Q.P by P.U Board)
12.What is guarantee profit a partner?( 2018 M.Q.P by P.U Board)
13.What do you mean By Past adjustments?(M.Q.P)
14. State any two features of Partnership (M.Q.P)
Chapter 3: Admission of a Partner.
1.What is Goodwill? (2018,2010,2008,2006 Annual)
2. State any two methods of valuing goodwill?(2017 Annual)
3.Name any two factors affecting goodwill.(2016,2008 Annual)
4.What is Sacrifice Ratio?(2015,2013,2011,2007 Annual, Preparatory
2016)
5. What is Revaluation Account?(2014,2010,2006 Annual, ( 2018
M.Q.P by P.U Board)
6. Give the journal entry for Goodwill brought in by the new partner
in cash. (2012 Annual)
7. Give the Journal entry for transferring profit on Revaluation
Account in admission of a partner. (2011 Annual)
8.How do you close Revaluation Account in admission of a partner?
(2007 Annual, P.U Board M.Q.P)
9. State any two methods of valuation of goodwill. ( 2018 M.Q.P by
P.U Board)
10.Give the Journal entry Depreciate Machinery at the time of
58
admission of a partner.( 2018 M.Q.P by P.U Board)
11.Give any two reasons admitting a new partner. ( 2018 M.Q.P by
P.U Board, M.Q.P, Preparatory 2019)
12. How do you close revaluation account when there is a profit?
(M.Q.P)
13. What is average profit method of valuation of Goodwill?(M.Q.P)
14.What do you mean by hidden goodwill?(M.Q.P)
15. Give Journal entry for decrease in the value of Creditor at the
time of admission of a partners
16.Give the Journal entry for decrease in the value of Liability in case
of admission of a partner?( P.U Board M.Q.P)
17. Why sacrifice ratio is calculated? ( P.U Board M.Q.P)
18.Goodwill of the firm valued at 2 years purchase of the average
profit of last 4 years. The total profit for last 4 years was
Rs.80,000.Calculate Goodwill of the firm.(Preparatory 2018)
Chapter4:Retirement of a partner (There is no 2 Marks Questions as

per Blueprint)
Chapter 5: Dissolution of a Partnership.
1.What is Realisation Account?( Annual 2018)

2.State any two differences between dissolution of partnership and
dissolution of partnership firm. ( Annual 2017)
3.Give the asset taken over by partner in case of dissolution of
partnership firm. ( Annual 2016)
4.Give the Journal entry to close the partners loan account on
Dissolution of Firm. ( Annual 2015)
5.Give the Journal entry for the asset taken over by partner in case of
dissolution of firm. ( Annual 2014,2007)
6. Pass Journal entry for the payment of Realisation expenses. (
Annual 2013,2009 June,2006)
7.When is Realisation Account opened? ( Annual 2012,2008
June,2018 M.Q.P by P.U Board)
59
8.Why is Realisation Account Prepared?(Annul 2011)
9. Give the Journal entry for sale of assets on dissolution of
partnership firm(Annual 2010)
10.Write the Journal entry for transferring the liabilities to the
Realisation Account?(Annual 2010 June)
11.Give the Journal entry for transfer of realisation loss to partner’s
capital accounts. (Annual 2009, 2018 M.Q.P by P.U Board)
12.Give the journal entry to close Partner’s loan account on
dissolution of firm.(Annual 2008)
13. Give the Journal entry to Transfer Realisation A/c profit to
partners A and B.(2007 Annual)
14.Give the Journal entry for a liability taken over by a partner on
dissolution of firm.( 2018 M.Q.P by P.U Board)
15.Give the meaning of Realisation account. ( 2018 M.Q.P by P.U
Board)
16. Give the Journal entry for transferring an asset to Realisation
account.( 2018 M.Q.P by P.U Board)
17.State any two circumstances under which a partnership firm is
dissolved.( M.Q.P by P.U Board)
18.How do you close realisation Account? ( M.Q.P by P.U Board)
19. What do you mean by dissolution of the partnership firm?
( M.Q.P by P.U Board)
20.What is dissolution of Partnership? ( M.Q.P by P.U Board)
21. Give the Journal entry for transfer of realisation profit to
partner’s capital Account?( 2018 Preparatory)
22. Give the Journal entry for transfer of accumulated profit to
partners capital account on dissolution of partnership firm(2019
Preparatory)
Chapter 6: Accounting for share capital.
1.What do you mean by issue of shares at premium?(Annual
2018,2008,2006 June, Preparatory 2018)
2.What is authorised capital? (Annual 2017, M.Q.P by P.U Board)
60
3. What do you mean by forfeiture of shares? (Annual
2016,2010,2006, 2018 M.Q.P by P.U Board )
4.What is over subscription? (Annual 2015)
5.What do you mean by issue of shares at par? Give an example.
(Annual 2014,2012)
6.What is calls-in-advance? (Annual 2011)
7.What is over subscription of shares? (Annual 2010, 2018 M.Q.P by
P.U Board)
8. State any two types of shares of a public company. (Annual 2009,
2007, 2018 M.Q.P by P.U Board, Preparatory 2016)
9.What is issue of shares at discount?(Annual 2009 June)
10.What are meant by calls in arrears? (Annual 2008, 2018 M.Q.P by
P.U Board, Preparatory,2019)
11. State any two differences between Public and Private company.
(2018 M.Q.P by P.U Board)
12. What is Buy-back of shares? (M.Q.P)
13. When shares can be forfeited? (M.Q.P by P.U Board)
Chapter 7: Issue and redemption of debentures, there is no 2 Marks
Question for examination.
Chapter 8:Financial statements of a company:
(some State syllabus questions excluded, no need to study for the
current N.C.E.R .T syllabus)
1.Name any two types of financial statements.(Annual 2016)
2.Write any two limitations of financial statements(2018 M.Q.P by
P.U Board)
3.List two objective of financial statements. (2018 M.Q.P by P.U
Board, Preparatory,2019)
current liabilities. (2018 M.Q.P by P.U Board)
5.State any two benefits of Financial statements. (2018 M.Q.P by P.U
Board)
61
6. How will you disclose the following items in the balance sheet of a
company?
(a) Loose tools (b) Proposed dividends.(M.Q.P)
7. Give the meaning of Financial statements.(M.Q.P)
8. State any two features of financial statements.(M.Q.P)
9. What do you mean by position statement?( M.Q.P by P.U Board)
10. Mention any two items that appear under” reserves and
surplus.(Preparatory 2018)
Chapter9: Analysis of Financial statements:
1.List out two techniques of Financial statement analysis.(Annual
2018,2017, 2018 M.Q.P by P.U Board, Preparatory,2019)
2. State any two uses of Financial statement analysis (Annual 2015,
2018 M.Q.P by P.U Board)
3. State any two limitations of Financial statement analysis. (2018
M.Q.P by P.U Board)
4. What are comparative financial statements? (M.Q.P)
5. Give the formula for change in percentage change in comparative
statements. (M.Q.P)
6. What do you mean by common size financial statements? (M.Q.P)
7. State any two objectives of Financial Statement Analysis? (M.Q.P,
Preparatory 2018)
8. Define Analysis of Financial Statements(M.Q.P)
9. What is Financial Statement Analysis? (M.Q.P by P.U Board,
Preparatory 2018)
10.List out two types of Financial Statement Analysis? (M.Q.P by P.U
Board)
Chapter 10: Accounting ratios. No 2 Marks Questions.
Chapter 11: Cash Flow Statement.
1. Mention any two activities which are classified for preparation of
cash flow statement as per AS-3. (M.Q.P by P.U Board,)
2.What is Cash flow statement? (M.Q.P by P.U Board,)
62
3.Write any two example for financing activities. (M.Q.P by P.U
Board, Preparatory 2019)
4. Write any two objectives for preparing cash flow statement.
(M.Q.P by P.U Board,)
5. What are operating activities? (M.Q.P)
6. What is cash flow statement? (M.Q.P)
7. What do you mean by Investing activities (M.Q.P)
8. State any two uses of cash flow statement. (M.Q.P)
-Dedicating this Accountancy Theory Study Material to all II PUC

Students.
By Joy K.V.M.com
63

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☺...: Accountancy II PUC :...

Chapter 1: Accounting for Not-For-Profit Organisations

Very Short Answer Questions:

2. What is the motive of Not-for-profit Organisations.

3.Where do you show Opening B ank ov erdraft in Receipt

4. Name any one final account of a Not- For- Profit

5. State any one major source of income of Not- For-

7. State any one feature of Receipts and Pay ments

9. What is Capital Fund?

10. Give an example for specific donation.

11. How do you treat the tournament expenses, when

12. How do you treat the Life Membership Fees?

Section B Two Marks Questions

1. What are Not-For-Profit Organisations?

3. State any two features of Not-for

4. Name any two books of accounts maintained by Not-

5. Giv e the meaning of Receipts and Pay ments Account

6. State any two features of R eceipt and

7. What do you mean by Income and

9. Give any two examples for revenue

Very Short Answer Questions:

2. What do you mean by partnership firm?

OR An association of two or more persons who carry on

3. State any one features of Partnership.

4. What is the minimum number of partners in a firm?

5. Name any one contents of Partnership deed?

6. Name any one Method of maintaining capital accounts

7.Name any one final accounts of partnership firm.

8. How do you distribute profit or loss among the partners

9. Why the profit and loss appropriation account is

10. At what rate Interest on advances by partners is to be

12. When Partners current accounts are prepared in

OR The capital of the partner remains constant(un

13. State any one special aspect of partnership accounts.

14. When the Current Accounts of Partners are opened?

15. Under fluctuating capital method , how many accounts

16. State any one feature of fluctuating capital method?

17. State any one situation in which provision of pay ment

18. Find out Interest at 8% p.a. on capital of 50,000 for 9

19. Which is the suitable method for calculation of

3. State any two features of partnership.

4. What is Partnership deed?

5. What are the methods of maintaining capital account of

6. What is fixed capital method?

OR It is system in which capital of the partner’s remains

8. State any two differences between fixed and fluctuating

9. What do you mean by Profit and loss Appropriation

10. What is guarantee of profit to a partner?

11. What do you mean by past adjustments?

12. State any two final accounts of a Partnership firm.

13. In the absence of partnership deed, specify the rules

14. State the rules relating to the followings in the

15. Name any methods for calculation of interest on

16. When the interest on drawings is generally provided

17. How do you close profit and loss appropriation

18. State any two special aspects of partnership accounts.

19. Name any two contents of Partnership deed.

2. What do you mean by reconstitution of a partnership

3. State any one reason for admission of a new partner?

4. State any one right acquired by a newly admitted

5. Why the NPSR is required at the time of admission of a

7. State any one factor affecting the value of goodwill

8. What is normal profit?

9. State any one method of valuation of goodwill?

this question also in admission with different answer